DRAFT GUIDELINE ON THE BACKSTOP FACILITY TO THE SRB FOR THE SRF
DISCLAIMER: this draft document is part of the ESM reform package agreed in principle
at the Eurogroup meeting of 4 December 2019, subject to the conclusion of national
procedures. It is made available for information purposes only. This document can be
formally adopted by the relevant ESM decision-making body only after the entry into
force of the ESM Treaty, as amended by the draft Amending Agreement.
European Stability Mechanism
Guideline on the backstop facility
to the SRB for the SRF
Aim and scope1
1. The ESM may provide the backstop facility to the Single Resolution Board
(the “SRB”) for the Single Resolution Fund (“SRF”) to support the application of the
resolution tools and exercise of the SRB’s resolution powers under the Single Resolution
Mechanism of the European Union (“EU”), established in accordance with Regulation
(EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014,
establishing uniform rules and a uniform procedure for the resolution of credit
institutions and certain investment firms in the framework of a Single Resolution
Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010
2. Loans under the backstop facility may be granted to the SRB only as a last resort and to
the extent it is fiscally neutral in the medium term for any of the purposes set forth in
Article 76 of SRMR, including liquidity provision subject to adequate safeguards, where
3. This guideline shall be applied in accordance with the interpretative declaration on the
European Stability Mechanism of 27 September 2012, according to which, among
others, Article 34 of the ESM Treaty does not prevent providing comprehensive
information so that the Members of the Board of Directors are able to share the
information received under this guideline with the national parliaments, as foreseen by
1 The political decision on the early introduction of the backstop will be taken in 2020 and be informed by the
risk reduction assessment of the institutions and competent authorities as laid down in ToR of December 2018.
If agreed, this should be implemented in an effective manner. This would be achieved through limited changes
to the Intergovernmental Agreement (IGA), which would bring forward the mutualisation of ex-post
contributions to the Single Resolution Fund.
The first recourse requirement for the Member State in which the resolution action takes place (the concerned
compartment) would be initially set at 30% of the maximum amount of ex post contributions and decrease
progressively until the end of the transitional period; whereas the contribution of all compartments (concerned
and non-concerned) would cover up to 70% of the maximum amount of ex post contributions pro-rata (up to
the actual level of the SRF –not taking into account possible disbursements).
In case of an early introduction, this guideline will need to be updated accordingly.
Granting of the backstop facility
1. In accordance with Article 18a(1) of the ESM Treaty, the Board of Governors may decide
by mutual agreement, on the basis of a request by the SRB and of a proposal by the
Managing Director, to grant a backstop facility to the SRB for the SRF, in the form of a
revolving credit line under which loans can be provided.
2. In accordance with Article 18a(1) of the ESM Treaty, the Board of Governors shall, by
mutual agreement, determine the key financial terms and conditions of the backstop
facility. The detailed financial terms and conditions of the backstop facility shall be
specified in a backstop facility agreement between the ESM and the SRB, to be
approved by the Board of Directors by mutual agreement and signed by the
3. The initial availability period of the backstop facility shall be ten years.
Size of the backstop
1. The Board of Governors shall, by mutual agreement, establish the nominal cap in
respect of the backstop facility. The nominal cap will limit the amount for the backstop
facility, so that its maximum amount (as per paragraph 2 below) is at all times equal to
or lower than the nominal cap. The Board of Governors may, by mutual agreement,
adjust the nominal cap, without prejudice to the procedure in Article 11(1) of the ESM
Treaty on a review of the maximum lending volume.
2. The Board of Governors shall, by mutual agreement, establish the maximum amount
when granting the backstop facility pursuant to Article 2. The outstanding amount
under the backstop facility shall never exceed such maximum amount. The maximum
amount is aligned with the euro area pro-rata share of ex-ante contributions to the
target level of the SRF but is not higher than the established nominal cap.
3. The Board of Directors may upon delegation by the Board of Governors and by mutual
agreement revise the maximum amount, upon notification by the SRB or as part of a
review pursuant to Article 11, so as to align the maximum amount with the euro area
share of the target level of the SRF up to the level of the nominal cap.
Procedure for approval of loans under the credit line
1. The SRB may request a loan under the backstop facility to the Managing Director for
financing a specific resolution case.
Such written request shall contain information listed in paragraph 1a to allow the Board
of Directors to take informed decisions on loans and respective disbursements under
the backstop facility. The request shall also contain confirmation that, in the SRB’s
opinion, the dedicated resolution scheme to be adopted by the SRB is compliant with
SRMR and with the BRRD, detail the suggested terms of the requested loan, confirm
that the criteria in points (a) and (d) to (f) of paragraph 2 of Annex IV to the ESM Treaty
for granting the loan are met.
1a. The SRB shall, for the purpose of paragraph 1, provide in such request the following
information, which shall be treated in accordance with Article 10:
a) the identity of the institution, as long as the institution has provided its express and
prior consent in accordance with Article 88(1) of the SRMR;
b) confirmation that the conditions for resolution are met, namely:
information on the FOLTF assessment,
no reasonable prospect that any alternative private sector measure
or supervisory action can prevent the failure of the institution having regard
to timing and the relevant circumstances, including early intervention
measures or the write-down or conversion of relevant capital instruments,
(iii) the resolution action is necessary in the public interest;
c) A descriptive outline of the resolution strategy and tools as laid down in the relevant
provisions in Article 22 and Article 24 to Article 27 of the SRMR, including the
application of discretionary exclusions from bail-in;
d) use of other funding sources, uses of the SRF and the common backstop, including
amounts and application to solvency or liquidity purposes;
e) the latest available information relating to balance sheet data supporting the
information provided under points b), c) and d) in order to assess the consequences
of the decision on the disbursement of the backstop facility and insofar that it is
relevant to understand the repayment capacity assessment performed by the ESM
and the SRB and to decide on the compliance with the fiscal neutrality criterion;
f) confirmation that:
the financial means of the SRF available to be used in accordance with Article
76 of the SRMR that are not already committed to resolution actions are
depleted, including in the situation where there are financial means available
in the SRF, but those are insufficient for the resolution case at hand;
ex-post contributions are not sufficient or not immediately available; and
(iii) the SRB is not able to borrow on terms and conditions acceptable by the SRB
in accordance with Articles 73 and 74 of the SRMR.
1b. After a duly completed request for a loan has been submitted by the SRB to the ESM,
the SRB shall, upon request from the Managing Director acting on his own motion or
on a motion of a member of the Board of Directors, promptly provide additional
relevant explanations, unless its disclosure would interfere with the exercise of the SRB
functions, in which case the SRB shall duly explain in writing the reasons for such
This shall be without prejudice to the swift decision-making foreseen under this
1c. The use of information provided under this guideline shall respect the tasks and powers
conferred by European Union law on the Council, the Commission, the ECB and the SRB
to decide on resolution, including the specific merits of each resolution action as laid
down in the European Union Treaties and in the SRMR, and the procedure laid down in
Article 18 thereof. In particular, information shared by the SRB with the Managing
Director and the Board of Directors in the course of the procedure for the approval of
loans and respective disbursements under the backstop facility shall be used for the
purpose of ensuring the ESM functions as laid down in Article 18a and Annex IV to the
ESM Treaty, most notably of determining the SRB capacity of servicing the loan within
the relevant maturity.
Without prejudice to Article 46 SRMR, following the entry into force of the resolution
scheme, the members of the SRB Board may be invited to voluntarily participate in a
public or non-public hearing at national parliaments, including budget committees.
2. Without prejudice to a more specific agreement on prefunding between the SRB and
the ESM, the SRB endeavours, on a best efforts basis and whenever possible, to provide
the ESM with an anonymised pre-notification, particularly when: (i) the ECB formally
consults the SRB on an assessment of whether an entity or a group is failing or likely to
fail (“FOLTF”) or the SRB informs the ECB of its intention to conduct a FOLTF
assessment, and (ii) the SRB considers that recourse to the backstop facility is highly
likely. Such notification would indicate, among other things, the estimated amount of
funds required, including whether in cash or in kind, and a tentative timeline. Such
notification would not disclose the name of the entity or group to be resolved nor any
other confidential information that would enable the entity or group to be identified.
3. After having received a request pursuant to paragraphs 1 and 1a, and based on a joint
assessment by the Managing Director and the SRB of the SRB’s capacity to service the
loan within the relevant maturity, the Managing Director shall submit to the Board of
Directors a proposal for the approval of a loan and the disbursement thereof, provided
that said request is complete and includes all information required pursuant to
paragraphs 1, 1a and 3. The SRB and the Managing Director may provide separate
assessments and conclusions including on the debt servicing schedule to the Board of
Directors in case they have not agreed on a joint assessment of the repayment capacity
of the SRB.
The Board of Directors will decide in light of the assessments presented and the
conclusions provided on the satisfaction of the principle of fiscal neutrality over the
medium term as enshrined in Article 12(1a) of the ESM Treaty and point (b) of
paragraph 2 of Annex IV to the ESM Treaty. The proposal of the Managing Director shall
include the debt servicing schedule as agreed with the SRB. In case there is no
agreement between the Managing Director and the SRB on the debt servicing schedule
(which shall include meeting a set of debt service cover ratios requirements under the
agreed scenarios), the proposal will be based on the Managing Director’s final
assessment and conclusions. The Managing Director shall inform the Board of Directors
ahead of its decision whether the requested funds are available to the ESM in
accordance with point (c) of paragraph 2 of Annex IV to the ESM Treaty.
4. In accordance with Article 18a(5) of the ESM Treaty on the basis of a request for a loan
by the SRB pursuant to paragraphs 1 and 1a and of a proposal pursuant to paragraph 3,
the Board of Directors shall decide by mutual agreement on loans and respective
disbursements under the backstop facility for a specific resolution case, guided by the
criteria enshrined in Annex IV to the ESM Treaty. Such decisions should not be
discriminatory (directly or indirectly) on grounds of nationality or place of business.
Where the European Commission and ECB conclude in separate assessments that a
failure to urgently adopt a decision on loans and respective disbursements under the
backstop facility would threaten the economic and financial sustainability of the euro
area, the Board of Directors shall decide, after having received these assessments, by
qualified majority in accordance with and subject to Article 18a(6) of the ESM Treaty.
Representatives of the European Commission and the ECB shall present the analysis
underlying their conclusion at the relevant meeting of the Board of Directors.
5. The Board of Directors shall, as a rule, take a decision pursuant to paragraph 4 within
12 hours of the SRB’s request pursuant to paragraphs 1 and 1a, subject to compliance
with paragraphs 1 to 3.
6. In exceptional cases, especially in the case of a particularly complex resolution
operation, the Managing Director may extend the time limit set pursuant to paragraph
5 by up to 12 additional hours, to up to 24 hours as from the SRB’s request pursuant to
paragraphs 1 and 1a.
7. The decision pursuant to paragraph 4 shall be conditional on the entry into force of the
dedicated resolution scheme substantially in line with the relevant information
presented to the Board of Directors at the time of the request submitted pursuant to
paragraphs 1 and 1a above and with the relevant information provided thereafter
pursuant to paragraph 1b. The SRB will confirm, in writing, the entry into force of the
resolution scheme substantially in line with the information provided to the Board of
Directors as soon as the resolution scheme has entered into force. For this purpose, the
SRB will provide adequate supporting information to the ESM, which will also include
the decision on the resolution scheme of the European Commission or, where relevant,
the Council pursuant to Article 18(7) SRMR. Such confirmation by the SRB represents
the second of the two elements referred to in paragraph 1 above in respect of point (g)
of paragraph 2 of Annex IV to the ESM Treaty. The SRB will confirm, in writing, that
points (a) and (d) to (f) of paragraph 2 of Annex IV to the ESM Treaty continue to be
satisfied, and that the information which the SRB provided in respect of point (b) of
paragraph 2 of Annex IV to the ESM Treaty continues to be accurate and complete.
The Managing Director will report to the Board of Directors that it has received all the
above confirmations from the SRB.
In case of substantial changes to the relevant information provided to the Board of
Directors pursuant to paragraphs 1, 1a, 1b and 3 above, the Board of Directors shall
take another decision whether or not to uphold its disbursement decision.
8. The Managing Director shall inform the Board of Directors that its decision became
effective and execute the disbursement of the approved loan, provided that the SRB
has provided the confirmations pursuant to paragraph 7 in relation to the continued
satisfaction of the criteria established in Annex IV to the ESM Treaty (other than point
(c) of paragraph 2 of such Annex).
9. The Managing Director shall disburse loans for liquidity purposes in tranches, if so
specified in the decision under paragraph 4 above, and under the terms foreseen in
Delegation to the Managing Director
1. In line with Article 18a(5) of the ESM Treaty, the Board of Directors may, by mutual
agreement, delegate its power to decide on loans and disbursements under the
backstop facility pursuant to Article 4(4) to the Managing Director. The delegation
decision by the Board of Directors shall specify a period of time, a maximum amount of
the sum of all loans, and if appropriate further terms with which the Managing Director
has to comply.
2. If the SRB requests a loan pursuant to Article 4(1) and the decision on such request falls
within the delegated authority of the Managing Director pursuant to paragraph 1, the
Managing Director shall approve the requested loan, provided that said request is
complete and that the criteria defined in Annex IV to the ESM Treaty are satisfied. The
Managing Director shall take such decision within the timeframe defined in Article 4(5)
and (6). Following receipt of the confirmation from the SRB pursuant to Article 4(7), the
Managing Director shall execute the disbursement, provided that the requested funds
have been raised by the ESM and all other criteria under Annex IV to the ESM Treaty
continue to be satisfied.
3. The Managing Director shall promptly inform the Board of Directors about any requests
for loans received and decisions on loans taken pursuant to paragraph 2.
4. The Board of Directors shall retain full power to exercise authority over any matter
delegated to the Managing Director under paragraph 1, without affecting the decisions
already taken under the delegation.
1. The Board of Directors or the Managing Director shall set the maturity of each loan on
the occasion of approval of the loan and disbursement pursuant to Article 4(4) or Article
5(2), respectively. As a rule, the loans provided under the backstop facility shall have an
initial maturity of 3 years.
2. The Board of Directors may by mutual agreement extend the maturity determined
pursuant to paragraph 1 by a maximum of 2 years upon a request by the SRB including
updated comprehensive information on projected inflows and outflows of the SRF.
3. By way of derogation from paragraph 1, the Board of Directors or the Managing
Director, as the case may be, may decide by mutual agreement that the initial maturity
may be 5 years in case of a threat to financial stability of the Banking Union, as assessed
and confirmed by the SRB in the request for the loan under the backstop facility.
Liquidity in resolution
In case the ESM provides loans to the SRB for the purposes of liquidity support from the
SRF, the following safeguards apply:
1. The ESM shall have the possibility to disburse a loan in tranches to the extent such
tranching is compatible with the resolution scheme according to the SRB, as specified
in Article 4(9) above. Prior to every subsequent tranche disbursement, the Board of
Directors shall be informed about the size of the entity’s actual financing needs in
relation to the initial projections by the SRB. The disbursement of the tranches does not
require additional or new loan requests and approvals and shall not be subject to
2. A step-up margin shall apply to a loan, in accordance with Section 4 (Other costs and
fees) of the Pricing Guideline.
3. The initial maturity shall be 12 months unless the Board of Directors decides differently
by mutual agreement. The SRB undertakes on a best-endeavour basis towards the ESM
to repay the loan within a period of 6 months in line with the adopted resolution
scheme. If the loan to SRB cannot be repaid within the initial maturity, the Board of
Directors shall decide by mutual agreement whether to extend the initial maturity of
the loan to the SRB by another 6 months each time based on the information provided
by the SRB.
If the loan cannot be repaid by the SRB within 12 (or such other initial maturity as
agreed) or 6 months, as applicable, the SRB shall justify it to the Board of Directors and
inform about the SRB’s assessment of the banks solvency position and the expected
recovery of the liquidity support injected, and include an updated repayment capacity
assessment pursuant to Article 8 of this guideline. In case there is no extension of the
initial maturity, the Board of Directors shall decide on a remedy plan to be agreed with
the SRB in accordance with Article 9 to ensure full repayment in line with Article 6.
4. In order to inform the Board of Directors about the state of play and recovery
perspective of the liquidity support from the SRF to the resolved entity, the SRB shall
report every three months on the loan provided for liquidity purposes, including the
following items: (i) outstanding amounts including information on the entity’s actual
financial needs in relation to the initial projection by the SRB, (ii) any extension of
maturity, and (iii) any other aspects with an impact on timely repayment including the
5. The SRB is expected to provide liquidity to banks on a fully collateralised basis where
available and practical. The collateral policy is expected to be presented to the ESM by
Repayment capacity assessments
1. To facilitate swift and efficient decisions on SRB requests for loans, the ESM shall follow
developments of the available funds in the SRF and the repayment capacity of the SRB,
based on information provided regularly by the SRB. Such information shall include
information on uses of the SRF and significant changes in the available funds in the SRF,
including information on payments due on alternative funding sources, etc.
2. The SRB and the ESM will jointly assess the repayment capacity of the SRB, including
the recoupment capacity of the SRB from the banking sector, considering projection
periods of three and five years, based on a common methodology, including all relevant
macroeconomic elements, and a data set agreed by the SRB and the ESM. The SRB will
provide to the ESM the necessary information regarding such assessments. The
repayment capacity assessment will also take into account other inflows and outflows
than those related to the recoupment capacity, in particular contingent liabilities
related to material litigation that could impact the SRB’s capacity to repay the ESM. The
SRB will disclose such information to the best of its knowledge. In case the SRB and the
ESM cannot agree on a joint assessment, the SRB and the ESM shall perform separate
3. As regards recoupment capacity forming part of the repayment capacity assessment,
the anonymous supervisory data necessary for the calculation of the recoupment
capacity from the banking sector will be held in a physical secure data room located at
the SRB premises. The SRB and the ESM will run the calculations jointly solely in the
physical data room, based on the common methodology. No bank-specific information
or data will be retrieved from the physical data room. The output data will take the
form of aggregated descriptive statistics that do not reveal any bank-specific
information and do not allow a re-identification of individual banks by combining the
descriptive statistics with each other or with other data sources.
4. Prior to any request for a loan pursuant to Article 4(1), the repayment capacity
assessment calculation will be performed at the discretion of the SRB or the ESM and
as a minimum once per year. In case of high likelihood of the use of the facility, the
calculation schedule can be accelerated to be performed on a quarterly or, where
needed, more frequent basis, without prejudice to the swift decision-making as
foreseen in this guideline. When a request for a loan or a request for an extension of
the maturity is filed, an up to date repayment capacity analysis should be available. The
calculation shall be based on the latest available information. If the SRB or the ESM
become aware of material changes that could affect the last regular review of the
repayment capacity, a new calculation will be performed.
When loans are outstanding, the ESM shall monitor the repayment capacity of the SRB for
the purposes of the ESM’s Early Warning System established pursuant to Article 18a(7) of
the ESM Treaty to ensure timely receipt of payments under the backstop facility. For this
purpose, the repayment capacity assessment calculation will be performed on a quarterly
basis, unless either the ESM or the SRB has reasonable grounds to request an update in
addition to this schedule. If the Internal Risk Committee on the basis of the ESM’s Early
Warning System established pursuant to Article 18a(7) of the ESM Treaty reporting
concludes that there might be doubt on timely repayment and that this could lead to a
payment default to the ESM, the Managing Director will inform the Board of Directors and
the observers in the Board of Directors immediately on a confidential basis. A remedy plan
satisfactory to the ESM shall be discussed and agreed between the ESM and the SRB.
The treatment of confidential information exchanged between the ESM and SRB in
accordance with Article 4 is subject to professional secrecy obligations in accordance with
Article 34 of the ESM Treaty and European Union law and shall be subject to appropriate
mechanisms for maintaining confidentiality.
1. The Board of Directors shall review this guideline, at least every three years after its
entry into force to assess whether changes are required in light of its application or
developments related to the Banking Union. On this occasion, the Board of Directors
may also review the backstop facility and other documents related to the backstop
facility approved by the Board of Directors or the Board of Governors and decide to or
recommend to amend those, as the case may be.
2. In addition to regular reviews, the Board of Directors shall carry out comprehensive
reviews every ten years after the approval of the backstop facility by the Board of
Governors, following which the Board of Directors may in addition to the decisions
referred to in paragraph 1 recommend to the Board of Governors to amend the criteria
for the approval of loans and disbursements enshrined in Annex IV to the ESM Treaty
or to terminate the backstop facility at the end of the respective availability period
pursuant to Article 12.
3. In accordance with Article 18a(8) of the ESM Treaty comprehensive reviews shall also
be carried out, where the condition of permanence of the legal framework on bank
resolution is not complied with as determined in line with the provisions established by
Board of Governors’ Resolution No. [●] on [●]/[●]/20[●●] (SG/BoG/:[●]/[●]/20[●●]).
1. The initial availability period of the backstop facility as set out in Article 2(3) will be ten
years. This availability period will be extended automatically for further ten year
periods, unless: (a) the SRB notifies the ESM, with a reasonable notice period
determined in the backstop facility agreement, that it does not wish for the backstop
facility to be renewed, or (b) based on the results of the review carried out pursuant to
Article 11(2) of this guideline, the Board of Governors decides by mutual agreement
that the backstop facility will not be extended and the ESM notifies the SRB thereof
with a reasonable notice period determined in the backstop facility agreement. A copy
of such notification shall be sent to the European Commission and the European Central
2. The backstop facility shall also be terminated in accordance with the Board of
Governors’ Resolution No. [●] on [●]/[●]/20[●●] (SG/BoG/:[●]/[●]/20[●●]) where
following a fundamental change event defined therein and the ensuing comprehensive
review, the Board of Governors did not decide by mutual agreement to continue the
backstop facility on the same or on amended terms. Within 90 calendar days as may be
extended by the Board of Governors by mutual agreement after any Fundamental
Change Event, the backstop facility shall be terminated.
Cooperation with non-euro area
In implementing this guideline, the ESM shall cooperate closely with non-euro area
Member States participating in the Single Supervisory Mechanism and in the Single
Resolution Mechanism and providing parallel facilities to the SRB for the SRF. The details
of the cooperation shall be set out in an agreement between the ESM and non-euro area
Member States participating in the Single Supervisory Mechanism and in the Single
Resolution Mechanism and providing parallel facilities to the SRB for the SRF.